Foreign divestment of B2B service firms: Institutional unpredictability and digitalization institutions

Abstract

Despite the significance of institutions for the business-to-business (B2B) service sector in both the conventional and digital marketplaces, the impacts of ever-changing conventional institutions and newly emerged digitalization institutions on B2B service firms remain underexplored. Drawing on a dynamic view of institutional change, we hypothesize that B2B service firms' exposure to institutional unpredictability in the conventional marketplace drives their foreign divestment, a relationship further strengthened by digitalization institutions, including regulatory support for digitalization, favorable environments for digital business, and affordable digital infrastructure. Analyzing a sample of 261 B2B service firms from 56 home countries and their divestment activities in 132 foreign (host) countries between 2013 and 2016, we find supportive evidence for these hypotheses. Therefore, our study contributes novel findings about the impact of unpredictable institutions on B2B service firms' de-internationalization at the interface between conventional and digital regimes.